High Court quashes attachment order of Cash Credit Account under Income Tax Act - debtor-creditor relationship key.

The High Court quashed the order of attachment of a Cash Credit Account under section 226(3) of the Income Tax Act, 1961, emphasizing the absence of a debtor-creditor relationship with the bank. The Court referred to a Madras High Court judgment emphasizing the need for such a relationship for attachment. Additionally, the Court directed the Appellate Authority to expedite the appeal process under section 220(6) and allowed the petitioner to pay the assessed amount in instalments pending appeal outcome. The writ petition was disposed of with no costs imposed.

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Issues involved: Challenge to order of attachment of Cash Credit Account u/s 226(3) of Income Tax Act, 1961 and direction for expeditious disposal of appeal u/s 220(6).

Judgment Summary:

Issue 1: Order of attachment of Cash Credit Account u/s 226(3)
The petitioner challenged the order of attachment of Cash Credit Account by the authorities u/s 226(3) of the Income Tax Act, 1961. The petitioner argued that the account had not been utilized yet and relied on a judgment of the Madras High Court. The respondent authorities contended that the attachment was permissible as per the provisions of the Act. The High Court deliberated on whether an order of attachment of a Cash Credit Account could be passed u/s 226(3) of the Act. It was noted that the petitioner had not sought a stay of demand or approached the Assessing Authority as a non-defaulter. The Court referred to the Madras High Court judgment which emphasized the need for a debtor-creditor relationship for attachment under u/s 226(3). The Court concluded that the Cash Credit Account, being a facility provided by the bank, could not be attached as the bank did not become a debtor. The impugned order of attachment was quashed and set aside.

Issue 2: Direction for expeditious disposal of appeal u/s 220(6)
The High Court directed the Appellate Authority to expedite the disposal of the appeal pending before them, emphasizing on timely resolution without unnecessary adjournments. The petitioner, who expressed willingness to pay the assessed amount in instalments, was permitted to do so without prejudice and subject to the appeal outcome. The writ petition was disposed of with no order as to costs.

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